VOLUNTARY DISCLOSURES PROGRAM
Introduction:
A failure to comply with the Income Tax Act or Excise Tax Act can result in penalties, interest, and in rare cases even criminal prosecution.[1] By voluntarily disclosing non-compliance before the CRA investigates, a taxpayer will avoid any potential prosecution, penalties can be reduced by up 100%, and interest can be reduced by up to 75%. The VDP is intended to encourage taxpayers to make a disclosure of non-compliance on their own initiative.
If non-compliance is instead discovered by audit or investigation, a taxpayer is more exposed to penalties, interest and prosecution.
If non-compliance relates to a filed tax return, the normal reassessment period is three years from issuance of the Notice of Assessment. Once that period has expired, the CRA cannot simply reassess because it discovers an error. Instead, the CRA needs to establish a misrepresentation attributable to neglect, carelessness or wilful default, or fraud. Therefore a VDP application may not make sense for older returns if the individual is confident that the CRA could not establish negligence, carelessness, wilful default or fraud. If a taxpayer has not filed a return, the CRA has no time limitations.
The relief is discretionary, arising inpart out of short sections of the ITA and ETA that expressly permit the CRA to waive or cancel penalties or interest.[2]
The program underwent significant changes in October 2025. This document reflects those changes. The CRA describes the program in two main documents:
When an application is received, the CRA assesses two fundamental questions before granting relief:
Extent of relief depends on whether VDP application was prompted or not:
For both types, a qualified application will result in protection from prosecution and gross negligence penalties. For an unprompted application, penalty relief will be 100% and interest will be reduced by 75%. For a prompted application, penalty relief wil be up to 100% at CRA’s discretion, and interest will be reduced by 25%.
What conditions must be met to qualify for relief?
The conditions are as follows:
Is the application unprompted or prompted?
An application is unprompted if made where there has been no verbal or written communication to the individual about an identified compliance issue related to the disclosure.
An education letter or notice that offers general guidance and filing information related to a particular topic will not make an application prompted.
A prompted application is made where there has been a verbal or written communication about an identified compliance issue related to the disclosure, which may include letters or notices (excluding education letters) to the taxpayer with one or more of the following:
For example, a system-generated notice advising that an tax return or HST return is overdue, or a specific ‘request to file’ letter, would likely render an application prompted.[5]
Note that the application form does not ask the applicant to identify if the application is prompted or unprompted. A determination is made by CRA based on its review of the facts, including any relevant communications from the CRA.[6]
The ‘mail’ section of a CRA account does not necessarily disclose all mail send by the CRA to an individual. Hardcopies could have been sent without a copy showing up online. If an individual is unsure what letters they’ve received from the CRA in the past, or what phone conversations they’ve had in the past, then it can known in advance how an application will be characterized.
How can an application be submitted?
A VDP application can be submitted by mail, fax, or via a CRA account (individual or business as applicable)
What happens after the CRA receives the application?
IC00-1R7 sets no formal service standard, and the CRA does not publish average processing times. Acknowledgement of receipt and an EDD (Effective Date of Disclsoure) will typically be sent within a few weeks. The time to fully process an application is variable and depends on complexity and whether the CRA requests additional information from the applicant. Therefore the CRA can’t provide an estimated timeframe for rendering final decisions.[7]
Can an individual also apply for Taxpayer Relief?
After the VDP application is completed, an individual can still apply for Taxpayer Relief to request further relief. This is different than the VDP. Penalties and interest might be waived if a person can establish that they are unable to pay what is owed due to finanical hardship.
References:
[1] Some particular acts or omissions under the ITA and ETA are summary or indictable offences, including tax evasion. The Criminal Code applies to summary and indictable offences under other Acts, which would include the ITA and ETA.
[2] Income Tax Act, s.220(3.1); Excise Tax Act, s.88(1), s.281.1, s.284, s.284.1(3),
[3] This is not entirely clear from IC00-1R7 itself. However, this was communicated by the CRA in a webinar held on June 18, 2026. See Questions 2 and 14 of the pdf.
[5] This was communicated by the CRA in a webinar held on June 18, 2026. See Questions 8 and 20 of the pdf.